Enterprise Networking: Cisco Challenges Range From SDNs to IT Spending to New Competitors

The Economy

Every tech company is going to feel the sluggish global economy. That said, given its size, the breadth of its product portfolio, and number and size of its customers, Cisco is going to be impacted by the problems in the Eurozone, a decelerating economy in China or government agencies in the United States holding onto their IT dollars. As CEO John Chambers said during a conference call with analysts and journalists in May: "One of the primary reasons Cisco sees these trends so much earlier than our peers in the market is, we're pretty pervasive. We're in every industry, every country, everything except the consumer in large volumes. And so we can see a hiccup in state and local spending in the U.S. perhaps two to four quarters before other people, our peers, get it on their radar screen."

Cisco Systems has had a relatively rough time of it during the past several months. There was the fumbled rollout in late June of the company's Cloud Connect service for the Linksys WiFi routers that angered customers well into July. More recently, the networking giant on July 23 announced it was cutting another 1,300 jobs as part of a "continuous process of simplifying the company," then learned about an hour later that longtime partner VMware was buying Nicira, one of several small companies making big strides in the networking market with its software-defined network (SDN) technology, a trend that threatens the profits Cisco is making from its expensive switches and routers. That was followed a day later by a partnership announcement between Cisco rivals Juniper Networks and Riverbed Technology around WAN optimization. These helped illustrate the various challenges Cisco is facing as it looks to continue remaking itself into a faster, more nimble company. To be sure, Cisco is a formidable tech company, as witnessed by the money it brings in through its networking business, data center offerings and various services. But it's also a company that needs to adapt to grow, and to try to do so in a difficult economic environment. Here are a few of the challenges Cisco is running up against.